United Way, Inc. Year Ended June 30, 2014, With Summarized Financial Information for the Year Ended June 30, 2013 With Report of Independent Auditors

Transcription

1 F INANCIAL S TATEMENTS Year Ended June 30, 2014, With Summarized Financial Information for the Year Ended June 30, 2013 With Report of Independent Auditors Ernst & Young LLP

2 Financial Statements Year Ended June 30, 2014, With Summarized Financial Information for the Year Ended June 30, 2013 Contents Report of Independent Auditors...1 Financial Statements Statements of Financial Position...3 Statement of Activities and Changes in Net Assets...4 Statement of Functional Expenses...5 Statements of Cash Flows...6 Notes to Financial Statements

3 Ernst & Young LLP Suite South Figueroa Street Los Angeles, CA Tel: Fax: ey.com Report of Independent Auditors The Board of Directors [Name] [00 Month 0000] [Title] [Company] We have audited the accompanying financial statements of, which comprise the [Address statement line of 1] financial position as of June 30, 2014, and the related statements of activities and [Address changes line in 2] net assets, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. [Subject Management s of the Responsibility letter is typed for the in Financial here] Statements Management is responsible for the preparation and fair presentation of these financial statements Dear [Name] in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair This illustrates the letter style to be used in external correspondence. It is left-aligned, single-spaced, with presentation of financial statements that are free of material misstatement, whether due to fraud double-spacing between paragraphs. Body text appears in 10pt EY Interstate Light with 13pt line spacing. or error. Addressee details appear in 10pt Interstate Light with 13pt line spacing, left-aligned. Punctuation is not included Auditor s at the Responsibility end of address lines. Date Our appears responsibility in 10pt Interstate is to express Light an with opinion 13pt line on spacing, these financial left aligned, statements and always based uses on the our global audit. date We standard conducted as shown our in audit the example in accordance above. with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable When assurance a subject about reference whether is used, the financial it should statements appear in 13pt are free Interstate of material Bold with misstatement. 13pt line spacing, left-aligned. Type is single-spaced with double-spacing between paragraphs and no punctuation is used at the end of the reference. An audit The involves subject is performing not prefaced procedures with Re, In re, to or obtain Subject. audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s The judgment, rest of this including is just text the to fill assessment the page and of to the show risks where of the material last line misstatement on this page ends. of the The rest financial of this is just text to fill page and to show where the last line on this page ends. The rest of this is just text to fill statements, whether due to fraud or error. In making those risk assessments, the auditor considers the page and to show where the last line on this page ends. The rest of this is just text to fill the page and to internal control relevant to the entity s preparation and fair presentation of the financial show where the last line on this page ends. The rest of this is just text to fill the page and to show where the statements in order to design audit procedures that are appropriate in the circumstances, but not last line on this page ends. The rest of this is just text to fill the page and to show where the last line on this page for ends. the purpose The rest of of this expressing is just text an to opinion fill the page on the and effectiveness to show where of the the last entity s line on this internal page ends. control. The rest Accordingly, of this is just we text express to fill the no page such and opinion. to show An where audit the also last includes line on this evaluating page ends. the The appropriateness rest of this is just text of to accounting fill the page. policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. The rest of this is just text to fill the page and to show where the last line on this page ends. The rest of this is just We text believe to fill the that page the and audit to evidence show where we the have last obtained line on this is page sufficient ends. The and rest appropriate of this is just to provide text to fill a the basis page for and our to audit show opinion. where the last line on this page ends. The rest of this is just text to fill the page and to show where the last line on this page ends. The rest of this is just text to fill the page and to show where the last line on this page ends. The rest of this is just text to fill the page and to show where the last line on this page ends. The rest of this is just text to fill the page and to show where the last line on this page ends. The rest of this is just text to fill the page and to show where the last line on this page ends. The rest of this is just text to fill the page A member firm of Ernst & Young Global Limited

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of at June 30, 2014, and the changes in its net assets, its functional expenses, and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. Report on Summarized Comparative Information We have previously audited s 2013 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated January 16, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2013, is consistent, in all material respects, with the audited financial statements from which it has been derived. December 9, 2014 ey A member firm of Ernst & Young Global Limited

5 Statements of Financial Position (In Thousands) Assets Current assets: Cash and cash equivalents 17,671 June 30 $ $ 16,816 Marketable securities, at fair value 8,300 7,531 Receivables: Current portion of pledges, less allowance for uncollectible accounts of $1,677 and $1,865 as of June 30, 2014 and 2013, respectively 14,081 12,992 Other 1,858 1,992 Prepaid expenses Total current assets 42,144 39,669 Long-term pledges receivable Long-term other receivable Prepaid pension asset 2,539 2,528 Equipment and leasehold improvements, at cost, less accumulated depreciation 1,475 1,809 Total assets $ 46,277 $ 44,145 Liabilities and net assets Current liabilities: Accounts payable and accrued expenses $ 4,818 $ 3,846 Current portion of capitalized lease obligation Current portion of designations and liabilities to other charities 8,982 9,417 Total current liabilities 13,848 13,322 Long-term portion of capitalized lease obligation 48 Deferred rent and lease incentives 2,257 2,375 Other postretirement plan obligations Total liabilities 16,812 16,159 Net assets: Unrestricted: Board-designated endowment fund 2,954 2,500 Undesignated 19,801 19,327 Total unrestricted 22,755 21,827 Temporarily restricted 6,710 6,159 Total net assets 29,465 27,986 Total liabilities and net assets $ 46,277 $ 44,145 See accompanying notes

6 Statement of Activities and Changes in Net Assets (In Thousands) Year Ended June 30, 2014, With Summarized Financial Information for the Year Ended June 30, 2013 Public support and revenue: Public support: Gross campaign results 57, Temporarily 2013 Unrestricted Restricted Total Total $ $ 9,994 $ 67,052 $ 69,847 Less designations to nonprofit organizations and other charitable organizations (37,304) (37,304) (39,874) Campaign revenue 19,754 9,994 29,748 29,973 Less provision for uncollectible pledges (1,346) (1,346) (1,623) Net campaign revenue 18,408 9,994 28,402 28,350 Other support ,013 Total public support 19,296 9,994 29,290 29,363 Administrative fee and expense recovery 1,274 1,274 1,270 Investment gains Miscellaneous income Net assets released from restrictions 9,443 (9,443) Total public support and revenue 30, ,221 31,115 Distributions, program services, and expenses: Program services: Gross funds awarded/distributed 51,866 51,866 55,079 Less donor designations (37,304) (37,304) (39,874) Net funds awarded/distributed 14,562 14,562 15,205 Community impact program services 3,194 3,194 2,873 Other program services 2,370 2,370 2,428 Total program services 20,126 20,126 20,506 Support services expenses: Fund-raising 7,614 7,614 7,297 Organizational administration 1,922 1,922 2,042 Total support services 9,536 9,536 9,339 Total distributions, program services, and expenses 29,662 29,662 29,845 Changes in net assets before additional pension liability 1, ,559 1,270 Change in additional pension liability (80) (80) 2,015 Changes in net assets ,479 3,285 Net assets at beginning of year 21,827 6,159 27,986 24,701 Net assets at end of year $ 22,755 $ 6,710 $ 29,465 $ 27,986 See accompanying notes

7 Statement of Functional Expenses (In Thousands) Year Ended June 30, 2014, With Summarized Financial Information for the Year Ended June 30, 2013 Program Services Support Services Community Other Fund- Organizational Impact Programs Raising Administration Total Total Salaries $ 1, $ 3,723 $ 797 $ 6,700 $ 6,101 Employee benefits Retirement expense Payroll taxes Total salaries and related expenses 1, ,578 1,014 8,268 7,754 Other expenses: Printing supplies and publications Occupancy Depreciation and amortization Professional fees 407 1, ,410 2,372 Travel Postage Telephone Rental and maintenance of equipment Conferences, conventions, and meetings Miscellaneous United Way Worldwide dues Total other expenses 1,508 1,380 3, ,832 6,886 3,194 2,370 7,614 1,922 15,100 14,640 Net funds awarded/distributed 14,562 14,562 15,205 Total distributions, program services and expenses $ 17,756 $ 2,370 $ 7,614 $ 1,922 $ 29,662 $ 29,845 See accompanying notes

8 Statements of Cash Flows (In Thousands) Operating activities Net cash received from donors by campaign year: campaign year 51,837 Year Ended June 30 $ $ 54, campaign year 12,310 13, and prior campaign years Cash received from bequests Cash paid to member agencies and projects (14,158) (14,802) Cash paid to agencies/other charitable organizations for designations and area wide pledges (37,554) (40,560) Cash paid to employees and suppliers (13,544) (13,282) Cash received from investment and miscellaneous income Cash paid for interest expense (7) (12) Other cash received net of other cash paid 1,063 1,277 Net cash provided by operating activities 1,285 2,460 Investing activities Purchase of equipment and leasehold improvements (23) (37) Purchase of marketable securities (1,066) (628) Proceeds from sale and maturities of marketable securities Net cash used in investing activities (371) (154) Financing activities Principal payments under capital lease obligations (59) (55) Net cash used in financing activities (59) (55) Net increase in cash and cash equivalents 855 2,251 Cash and cash equivalents at beginning of year 16,816 14,565 Cash and cash equivalents at end of year $ 17,671 $ 16,

9 Statements of Cash Flows (continued) (In Thousands) Year Ended June 30 Changes in net assets $ 1,479 $ 3,285 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Depreciation and amortization Net unrealized gain on investments (421) (224) Changes in assets and liabilities: Pledges and other receivables (935) 1,095 Prepaid expenses 104 (54) Prepaid pension asset (11) (1,450) Accounts payable and accrued expenses Designation liabilities (435) (441) Deferred rent and lease incentives (118) (119) Other postretirement plan obligations 293 (177) Net cash provided by operating activities $ 1,285 $ 2,460 See accompanying notes

10 Notes to Financial Statements June 30, Nature of Activities and Summary of Significant Accounting Policies Nature of Organization, dba United Way of Greater Los Angeles (United Way or Organization), is a tax-exempt, nonprofit organization under the Internal Revenue Code Section 501(c)(3) that administers an annual fund-raising campaign in Los Angeles County, California, and uses those funds to support a variety of human services programs in the Greater Los Angeles area. United Way is committed to Creating Pathways Out of Poverty so that everyone who lives in our communities can have a better quality of life. The Organization is focused on providing longterm solutions in the three interconnected areas that are the root causes of poverty: Helping people have access to permanent housing with supportive services, Helping students graduate from high school prepared for college and the workplace, Helping people become financially stable. United Way s mission is to permanently break the cycle of poverty for most vulnerable neighbors: families, children, veterans, and the homeless. Basis of Presentation The financial statements of United Way have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States for not-for-profit organizations. Among its principles, the guidance states that the net assets are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of United Way and changes therein are classified and reported as follows: Unrestricted net assets include all support unless donor stipulations specify how the donated assets must be used. Temporarily restricted net assets include gifts of cash and other assets if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities and changes in net assets as net assets released from restrictions

11 1. Nature of Activities and Summary of Significant Accounting Policies (continued) As of June 30, 2014 and 2013, total temporarily restricted net assets of $6,710,000 and $6,159,000, respectively, represent unspent grants and donations made by donors that are specifically intended for United Way s programs that benefit the Creating Pathways Out of Poverty plan and multi-year pledges for which time restrictions have not expired. Permanently restricted net assets include gifts that require, by donor restriction, that the corpus be invested in perpetuity and only the income be made available for program operations in accordance with donor restrictions. United Way does not have any permanently restricted net assets as of June 30, 2014 and Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Campaign Contributions Unconditional promises to give cash and other assets are reported at fair value at the date the promise is received. Campaign contributions arise from a fund-raising campaign conducted by United Way and are included in campaign revenue. Contributions for which United Way has little or no discretion in determining how the funds will be used (e.g., designations and distributions to other United Ways) are excluded from net campaign revenues. The regular annual fund-raising campaign generally commences in the fall and concludes at June 30 each year

12 1. Nature of Activities and Summary of Significant Accounting Policies (continued) All contributions are considered available for unrestricted use unless specifically restricted by the donor. Contributions that have donor-imposed or time restrictions are recorded as temporarily restricted net assets until the restrictions have been met or the time has lapsed. Contributions generally include: 1. Cash contributions 2. Pledges (promises to give) received represented by signed pledges or written commitments 3. Employer reports of pledges (promises to give) by employees under payroll deduction plans. Program Services Net funds awarded/distributed represent the total amount awarded to other not-for-profit organizations at United Way s discretion. It also includes payments to eligible participants or organizations that enrolled in utility assistance programs. Community impact program services consist of the total expenses allocated to United Way s internal operating program activities. Most of these programs are funded through unrestricted contributions. Other program services are activities that are covered through grants and contracts funded by corporations, private foundations, and government agencies. Most of these programs fall under one of the three interconnected areas that directly support achievement of the Creating Pathways Out of Poverty goals. Equipment and Leasehold Improvements Fixed assets are recorded at cost, if purchased. Donated fixed assets are reported at estimated fair value at the date of contribution. Gifts of long-lived assets received without donor-imposed restrictions are reported as unrestricted support. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed using the straight-line method

13 1. Nature of Activities and Summary of Significant Accounting Policies (continued) Leasehold improvements and equipment under capital lease obligations are amortized on the straight-line method over the shorter period of the lease term or the estimated useful life of the assets. Such amortization is included in depreciation and amortization in the financial statements. Estimated useful lives are as follows: Leasehold improvements Furniture and equipment Vehicles Software Shorter of the estimated useful lives or the remaining term of the lease 5 years 4 years 3 years Routine maintenance and repairs are charged to expense as incurred. United Way reviews the recoverability of its long-lived assets as required by Accounting Standards Codification (ASC) Topic 360, Property, Plant, and Equipment, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The estimated future cash flows are based upon, among other things, assumptions about expected future operating performance and may differ from actual cash flows. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is made. As of and for the year ended June 30, 2014, no indicators of impairment were identified and no impairment was recorded. Marketable Securities Marketable securities received as payments on pledges are sold and the net proceeds recorded as payments on those pledges. Marketable securities purchased by United Way are reported at fair value provided by the custodians using market quoted prices. Realized gains and losses and net investment income are recognized as earned and are reported in the statement of activities and changes in net assets as changes in unrestricted or temporarily restricted net assets, depending on the donor stipulations on the use of the income. Unrealized gains and losses are reported in the statement of activities and changes in net assets as changes in unrestricted net assets unless their use is temporarily or permanently restricted by donors to a specified purpose or future period

14 1. Nature of Activities and Summary of Significant Accounting Policies (continued) Fair Value Measurements The carrying amount of cash and cash equivalents, pledges and other receivables, and accounts payable and accrued expenses approximates fair value due to short-term maturities of these instruments. ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Level 2 Level 3 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Inputs to the valuation methodology are unobservable and significant to the fair value measurement. A financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Cash and Cash Equivalents United Way considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. United Way maintains its cash balances at several financial institutions located in Southern California. Cash balances held may have at times exceeded the federally insured limits. United Way has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents

15 1. Nature of Activities and Summary of Significant Accounting Policies (continued) Donated Services The contribution of services is recognized at fair value if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills that are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation. During the years ended June 30, 2014 and 2013, United Way received donated consulting services that met the recognition criteria described above. Management has estimated that professional services of $184,000 was received related to social media consulting during the year ended June 30, 2014, and $400,000 was received for strategic planning for the year ended June 30, Both amounts are included in the statement of activities and changes in net assets, as unrestricted campaign revenue and allocated across program and support services expense. United Way also receives services from a large number of volunteers who have donated their time in United Way s program services and its fund-raising campaign. No amounts have been reflected for these types of donated services in the financial statements, as they do not meet the criteria outlined above. Income Taxes United Way is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, and California Code Section 23701(d). As a result, no provision for income taxes has been recorded in the accompanying financial statements. Functional Allocation of Expenses Expenses are classified on a functional basis in the statement of activities and changes in net assets. Program services are those related to community impact program services and other program services and include the cost of certain community programs and the expenses associated with the administration and management of these activities. Supporting services are those expenses associated with fundraising and organizational administration. For purposes of the statements of functional expenses, a portion of organizational administration expenses is allocated to all program and supporting services on the basis of full-time employee equivalents

16 1. Nature of Activities and Summary of Significant Accounting Policies (continued) Summarized Financial Information for Fiscal 2013 The accompanying financial statements include certain prior year summarized comparative information in total but not by net asset class or functional category. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States. Accordingly, such information should be read in conjunction with the June 30, 2013, financial statements of United Way, from which the summarized information was derived. Reclassifications Certain amounts in the accompanying 2013 summarized comparative information were reclassified to conform to the 2014 financial statement presentation. The Organization previously reported investment and other income as one line item in the statement of activities and change in net assets, but this year it reported as two separate items: investment gains and miscellaneous income. Additionally, a change in presentation was made to the statement of functional expenses by including other program services and net funds awarded/distributed in the statement. Management believes the current presentation is more meaningful to the users of the financial statements. 2. Pledges Receivable Pledges receivable and the allowance for uncollectible accounts on net campaign revenue during the fiscal years ended June 30 are summarized as follows (in thousands): Pledges receivable arising from undesignated campaign contributions $ 10,755 $ 10,735 Pledges receivable arising from designated campaign contributions 5,045 4,204 Total gross pledges receivable 15,800 14,939 Less unamortized discount (2) (22) Subtotal 15,798 14,917 Less allowance for uncollectible accounts (1,677) (1,865) Total net pledges receivable $ 14,121 $ 13,

17 2. Pledges Receivable (continued) Amounts included in the statements of financial position at June 30 consist of the following (in thousands): Current portion of pledges receivable $ 14,081 $ 12,992 Long-term pledges receivable Total net pledges receivable $ 14,121 $ 13,052 The provision for uncollectible pledges is made on net campaign contributions (undesignated contributions) and is based primarily on recent historical experience as well as other factors anticipated to affect collections. Total gross pledges receivable at June 30, 2014, are due to be collected in the following fiscal years (in thousands): Amounts due in: Less than one year $ 15,760 One to five years 40 Total gross pledges receivable $ 15,800 Included in pledges receivable at June 30, 2014 and 2013, are multi-year pledges of approximately $60,000 and $250,000, respectively. The multi-year pledges are discounted using an effective rate range from 0.78% to 5.54%. United Way received a conditional promise to give in the amount of $7,775,000 over three years beginning in September 2012, to support the Organization s programs under permanent housing. For the year ended June 30, 2014, $2,350,000 of revenue was recognized from this conditional grant when payment conditions were met, including raising matching gifts. The remaining conditional promise to give was $4,325,000 at June 30, United Way also received another conditional promise to give in the amount of $1,000,000 over two years beginning in November 2013 for the Organization s education programs. For the year ended June 30, 2014, $200,000 of revenue was recognized from this conditional grant when payment conditions were met, including raising matching gifts, and the remaining conditional promise amount was $800,000 at June 30,

18 3. Marketable Securities and Fair Value The schedules below classify United Way s investments carried at fair value based upon the three-tier hierarchy required by ASC 820 (in thousands): Fair Value Measurements at June 30, 2014 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs June 30, 2014 (Level 1) (Level 2) (Level 3) Money market funds $ 543 $ 543 $ $ Mutual funds fixed income 5,641 5,641 Mutual funds equity 2,116 2,116 Total investment assets at fair value $ 8,300 $ 8,300 $ $ Fair Value Measurements at June 30, 2013 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs June 30, 2013 (Level 1) (Level 2) (Level 3) Money market funds $ 518 $ 518 $ $ Mutual funds fixed income 5,355 5,355 Mutual funds equity 1,658 1,658 Total investment assets at fair value $ 7,531 $ 7,531 $ $

19 3. Marketable Securities and Fair Value (continued) Investment gains included in the following components for the year ended June 30 (in thousands): Interest and dividends $ 119 $ 117 Net realized and unrealized gains Total investment gains $ 540 $ Equipment and Leasehold Improvements Equipment and leasehold improvement at June 30 consists of the following (in thousands): Vehicles $ 79 $ 79 Leasehold improvements 1,728 1,756 Furniture, equipment, and software 1,165 1,197 Capital leases equipment ,420 3,480 Less accumulated depreciation (1,945) (1,671) Equipment and leasehold improvements, net $ 1,475 $ 1,809 Depreciation and amortization expense of equipment and leasehold improvements in total was approximately $357,000 and $355,000 for the years ended June 30, 2014 and 2013, respectively. Included in the amount is amortization expense on the capital lease equipment of approximately $54,000 for the years ended June 30, 2014 and Accumulated amortization on the capital lease equipment is approximately $408,000 and $355,000 as of June 30, 2014 and 2013, respectively

20 5. Administrative Fee and Expense Recovery United Way performs fund-raising and processing services for certain agencies, nonprofit organizations, and a Combined Federal Campaign for which it is reimbursed. Such amounts are reflected as administrative fee and expense recovery and totaled $1,274,000 in 2014 and $1,270,000 in Retirement Plans United Way has a defined benefit, noncontributory pension plan (the Plan) covering substantially all of its regular employees. The Plan is accounted for in accordance with the provisions of ASC Topic 715, Compensation Retirement Benefits (ASC 715). The benefits are based on years of service and the employee s compensation during the last three years of employment. United Way s funding policy is to contribute annually the minimum amount required by the Employee Retirement Income Security Act of ASC 715 requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position, recognize changes in that funded status in the year in which the changes occur through changes in net assets, and measure a plan s assets and its obligations that determine its funded status as of the end of the employer s fiscal year. The following tables set forth the funded status of the Plan as provided by United Way s consulting actuaries at June 30 (in thousands): Change in projected benefit obligation: Benefit obligation at beginning of year $ 17,730 $ 17,387 Service cost Interest cost Actuarial loss (gain) 2,097 (420) Benefits paid (918) (468) Projected benefit obligation at end of year $ 20,145 $ 17,

21 6. Retirement Plans (continued) Change in plan assets: Fair value of assets at beginning of year $ 20,258 $ 18,465 Actual return on plan assets 3,344 2,261 Benefits paid (918) (468) Fair value of assets at end of year $ 22,684 $ 20,258 Fair value of assets of the Plan $ 22,684 $ 20,258 Projected benefit obligation (20,145) (17,730) Funded status $ 2,539 $ 2,528 Amounts included in the statements of financial position at June 30 consist of (in thousands): Prior service cost $ (83) $ (92) Net loss (5,431) (5,624) Additional pension liability (5,514) (5,716) Prepaid pension expense 8,053 8,244 Net asset recognized in the statements of financial position $ 2,539 $ 2,528 Net periodic pension cost includes the following components for the year ended June 30 (in thousands): Service cost $ 457 $ 559 Interest cost Expected return on plan assets (1,428) (1,347) Amortization of prior service costs 9 9 Amortization of actuarial loss Net periodic pension cost $ 191 $

22 6. Retirement Plans (continued) The net asset reflected in the accompanying statements of financial position is the excess of the fair value of plan assets over the projected benefit obligation, or the funded status of the Plan at June 30, 2014 and Estimated amounts that will be amortized from additional pension liability over the next fiscal year are as follows (in thousands): Prior service cost $ 9 $ 9 Net loss (310) (374) Assumptions used to determine benefit obligations at June 30 are as follows: Discount rate 4.02% 4.54% Rate of compensation increases 3.00% 3.00% Measurement date 6/30/2014 6/30/2013 Assumptions used to determine the net pension cost at June 30 are as follows: Discount rate 4.54% 3.98% Rate of compensation increases 3.00% 3.00% Long-term rate of return on assets 7.25% 7.50% Measurement date 6/30/2013 6/30/2012 Additional year-end information at June 30 is as follows (in thousands): Projected benefit obligation $ 20,145 $ 17,730 Accumulated benefit obligation 18,450 16,310 Fair value of plan assets 22,684 20,

23 6. Retirement Plans (continued) The following tables set forth by level, within the fair value hierarchy, United Way s plan assets at fair value as of June 30 (in thousands). Fair Value Measurements at June 30, 2014 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs June 30, 2014 (Level 1) (Level 2) (Level 3) Cash and cash equivalents $ 345 $ 345 $ $ Common stock 2,222 2,222 Mutual funds fixed income 7,392 7,392 Mutual funds equity 12,725 12,725 Total investment assets at fair value $ 22,684 $ 22,684 $ $ Fair Value Measurements at June 30, 2013 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs June 30, 2013 (Level 1) (Level 2) (Level 3) Cash and cash equivalents $ 197 $ 197 $ $ Common stock 2,203 2,203 Mutual funds fixed income 6,697 6,697 Mutual funds equity 11,161 11,161 Total investment assets at fair value $ 20,258 $ 20,258 $ $

24 6. Retirement Plans (continued) Asset allocations are as follows at June 30: Actual asset allocations: Equity securities 66% 67% Fixed income/debt securities Cash 1 1 Total 100% 100% Target asset allocations: Equity securities 65% 65% Fixed income/debt securities Total 100% 100% The policy of the Plan is to provide for growth of principal through diversification in a portfolio of common stocks, bonds, cash equivalents, and other investments that may reflect varying rates of return. Although there is no specific allocation to cash equivalents, the percentage of total assets allocated to cash equivalents at any time should be sufficient to ensure enough liquidity to meet benefit disbursements and general operating expenses. To develop the expected long-term rate of return on assets assumption, United Way considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 7.25% long-term rate of return on assets assumption for the fiscal year ended June 30, Due to the funded status of the Plan, United Way does not intend to make additional contributions during fiscal year

25 6. Retirement Plans (continued) Estimated future pension benefit payments for the following fiscal years are as follows (in thousands): Benefit Payments 2015 $ 1, , , , through ,693 Total $ 11,810 In addition, United Way has a Supplemental Executive Retirement Plan, which was established in The related liability in the statements of financial position was approximately $335,000 and $346,000 as of June 30, 2014 and 2013, respectively, of which $75,000 and $82,000 are included in accounts payable and accrued expenses for the current portion of the obligation as of June 30, 2014 and 2013, respectively. The remaining portion is presented in other postretirement plan obligations in noncurrent liabilities. In fiscal year 2009, United Way established another Supplemental Executive Retirement Plan for one of its officers. The related liability in the statements of financial position of approximately $447,000 and $143,000 as of June 30, 2014 and 2013, respectively, is presented in other postretirement plan obligations in noncurrent liabilities. United Way also has a qualified matching employee retirement savings plan (the Savings Plan) under Internal Revenue Code Section 403(b), which was established in All employees are eligible to participate in the Savings Plan immediately upon employment and may contribute up to 25% of their compensation, subject to IRC annual limitations. After one year of service, United Way makes matching contributions equal to 50% of the first 6% of employee contributions, which contributions vest over a period of two to five years based on years of vesting service. United Way contributions under the Savings Plan totaled approximately $56,000 and $53,000 for the years ended June 30, 2014 and 2013, respectively

26 7. Custodian Funds Custodian funds are held by United Way on behalf of other entities and are disbursed only upon instructions from such entities. The amounts of custodian funds held for other parties and not commingled by United Way totaled $622,000 and $419,000 as of June 30, 2014 and 2013, respectively, and are not reflected in the accompanying financial statements. 8. Commitments and Contingencies Leases During fiscal 2010, United Way entered into a capital lease for the leasing of various copiers. The lease is for a term of 60 months expiring in The lease for the copiers requires aggregate minimum future lease payments of $50,000, representing all current lease obligation (in thousands): Year ending June 30: 2015 $ 50 Less amount representing interest (2) Present value of net minimum lease payments (current obligation) $ 48 United Way entered into a 15-year operating lease that commenced in April 2010 and relocated its corporate headquarters during fiscal Under the terms of the lease, United Way received approximately $2,048,000 as a tenant improvement allowance, which covered most of the relocating and renovation costs. In addition, United Way is entitled to a refurbishment allowance of approximately $79,000 that is to be used by The refurbishment amount is presented in other receivables in noncurrent assets in the statements of financial position. The deferred rent and lease incentives liability is approximately $2,257,000 as of June 30, 2014, and $2,375,000 as of June 30, 2013, and it consists of the tenant improvement allowance, refurbishment allowance, and rent abatement, which are amortized over the lease term

27 8. Commitments and Contingencies (continued) Total rent expense relating to the corporate headquarters amounted to approximately $801,000 in 2014, and $795,000 in 2013, including operating expense and property tax pass-throughs. The lease requires aggregate minimum future rental payments of $10,473,000, including amounts due for the following fiscal years (in thousands): Year ending June 30: 2015 $ and thereafter 5,782 $ 10,473 In addition, United Way has noncancelable operating lease agreements expiring through fiscal year 2018 for equipment and other office space under which the related rental expense was approximately $94,000 and $87,000 in 2014 and 2013, respectively, and whose minimum future payments as of June 30, 2014, are as follows (in thousands): Year ending June 30: 2015 $ $ 43 Legal Matters United Way may from time to time become a party to various legal proceedings, arising in the ordinary course of business. United Way investigates these claims as they arise. United Way does not believe, based on current knowledge and advice of legal counsel, that any of the current claims are likely to have a material adverse effect on its financial position, results of activities, or cash flows

28 9. Line of Credit United Way has a line of credit with a bank that allowed for borrowing of up to $2,000,000 at the bank s referenced rate (LIBOR+2%). The line of credit expires on March 31, There were no borrowings under the line of credit during fiscal 2014 and there were no fees paid for the unused line of credit. There are no financial covenants related to the line of credit. 10. Related-Party Transactions Certain board members and their affiliated organizations provide consulting services for various projects and programs for United Way. Consulting services for the years ended June 30, 2014 and 2013, were approximately $189,000 and $5,000, respectively, and were recorded as professional fees expenses in the accompanying financial statements. Included in the $189,000 for the year ended June 30, 2014 was donated services of $184,000 received related to social media consulting. The donated services were provided by a board member s organization and United Way did not pay for the services; therefore, the amount was included in the related party transactions. All transactions were arm s-length and processed in accordance with United Way s purchasing policy. As United Way is an organization that interfaces with many businesses in Los Angeles County, the Board of Directors includes prominent leaders in the community. 11. Board-Designated Endowment Fund The Board-Designated Endowment Fund (Endowment Fund) was set up to invest funds and provide security to the future operations of United Way. The Endowment Fund is invested to provide safety of principal through diversification in a portfolio of money market and mutual funds, which may reflect varying risks, and rates of return. The investments are diversified within asset classes (e.g., equities are diversified by economic sector, industry, quality, and size). The long-term target asset allocation for the investment portfolio is determined by the investment committee of United Way to facilitate the achievement of the Endowment Fund s long-term investment objectives within the established risk parameters. As of June 30, 2014, the target asset allocation was 65% equities and 35% fixed income. The actual asset allocation, which will fluctuate with market conditions, will receive the ongoing scrutiny of the investment committee, which bears the responsibility for making adjustments in order to maintain target ranges

29 11. Board-Designated Endowment Fund (continued) The investments and related income generated by the Endowment Fund are considered unrestricted assets. The changes in the Endowment Fund net assets for the fiscal years ended June 30 (in thousands) are as follows: Board-Designated Endowment Fund, beginning of the year $ 2,500 $ 2,210 Investment return: Investment income Net appreciation (realized and unrealized) Total investment return Board-Designated Endowment Fund, end of the year $ 2,954 $ 2,500 The Endowment Fund assets are included in marketable securities in the statement of financial position. The spending policy for the Endowment Fund is 4.5% per year. The spending rate is applied against the market value at fiscal year-end wherein market value is defined as a rolling three-year average. No amount was appropriated for expenditure during the fiscal years ended June 30, 2014 and Subsequent Events United Way has evaluated events subsequent to June 30, 2014, to assess the need for potential recognition or disclosures in the financial statements. Such events were evaluated through December 9, 2014, the date these financial statements were available to be issued. Based upon this evaluation, it was determined that no subsequent events occurred that require recognition or additional disclosure in the financial statements

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